• Filing Date: 2020-07-09
  • Form Type: 10-Q
  • Description: Quarterly report
v3.20.2
Condensed and Consolidated Financial Statements for Entities in Bankruptcy
6 Months Ended
May 31, 2020
Condensed Financial Information of Debtor-in-Possession Disclosure [Abstract]  
Condensed and Consolidated Financial Statements for Entities in Bankruptcy
Condensed and Consolidated Financial Statements for Entities in Bankruptcy

Condensed consolidated financial information for Lamington Road DAC is set forth below, presented at historical cost basis.

Lamington Road DAC
(Debtor-in-Possession)
Condensed and Consolidated Statements
Balance Sheet

 
May 31,
2020
 
May 31,
2019
 
(Unaudited)
 
 
 
(In thousands except share data)
ASSETS
 
 
 
Assets
 
 
 
     Cash and cash equivalents
$

 
$
8,703

     Prepaid expenses and other assets

 
606

     Investment in life settlements, at estimated fair value

 
475,551

     Receivable for maturity of life settlements

 
46,190

          Total assets
$

 
$
531,050

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
     Accounts payable and accrued expenses
$

 
$
8,501

     Other liabilities (subject to compromise)*

 
7,588

     Revolving Credit Facility debt, at estimated fair value

 
394,570

     Promissory notes payable (subject to compromise)*

 
146,393

          Total liabilities

 
557,052

 
 
 
 
Share Capital (1 share of $1 authorized and issued)

 

Additional paid in capital

 
60,602

     Accumulated deficit/retained earnings

 
(86,604
)
          Total stockholders' deficit/equity

 
(26,002
)
          Total liabilities and stockholders' equity
$

 
$
531,050


*Liabilities subject to compromise include pre-petition unsecured claims, which may be settled at amounts different from those recorded in the condensed consolidated balance sheet.
Lamington Road DAC
(Debtor-in-Possession)
Condensed and Consolidated Statements of Operations

 
Three Months Ended
May 31,
 
Six Months Ended May 31,
 
2020
 
2019
 
2020
 
2019
Change in fair value of life settlements (Notes 11 & 16)
$

 
$
(17,075
)
 
$

 
$
(29,825
)
Other income

 
131

 

 
365

      Total income

 
(16,944
)
 

 
(29,460
)
 
 
 
 
 
 
 
 
Interest expense

 
2,600

 

 
5,000

Change in fair value of White Eagle Revolving Credit Facility (Notes 12 & 16)

 
29,071

 

 
43,679

Reorganization cost

 
6,742

 

 
8,644

Legal fees

 
627

 

 
1,214

Professional fees

 
523

 

 
950

Administrative service fees - affiliate

 
1,338

 

 
2,765

Other general and administrative expenses

 
442

 

 
540

Total expenses

 
41,343

 

 
62,792

Income taxes

 

 

 

(Loss) income
$

 
$
(58,287
)
 
$

 
$
(92,252
)


Lamington Road DAC
(Debtor-in-Possession)
Condensed and Consolidated Statements of Cash Flows


 
Six Months Ended May 31,
 
Six Months Ended May 31,
 
2020
 
2019
 
 
 
 
Net cash used in operating activities
$

 
$
(10,632
)
Cash flows from investing activities
 
 
 
Premiums paid on life settlements

 
(50,947
)
Proceeds from maturity of life settlements

 
32,342

Net cash provided by/(used in) investing activities
$

 
$
(18,605
)
Cash flows from financing activities
 
 
 
Borrowings from White Eagle Revolving Credit Facility

 
4,221

Net cash provided by financing activities
$

 
$
4,221

Net increase (decrease) in cash and cash equivalents

 
(25,016
)
Cash and cash equivalents, at beginning of the period

 
33,719

Cash and cash equivalents, at end of the period
$

 
$
8,703

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest during the period
$

 
$
5,000



Related Party Transactions

Certain related party transactions had been eliminated in consolidation. Due to the deconsolidation of Lamington, transactions after November 13, 2018 were no longer eliminated until the discharge of the Chapter 11 Cases, effective August 17, 2019 after which related party transactions are again eliminated in consolidation. The below is a description of related party transactions for the period.

Administrative Services Fees

In 2014, White Eagle entered into an Administrative Service Agreement with Imperial Finance and Trading ("IFT"). Under the agreement, IFT will perform certain non-discretionary, administrative or ministerial services to assist with certain reporting, compliance and document retention duties and obligations arising under or in connection with the Amended and Restated Loan and Securities Agreement. IFT shall recover all cost incurred in performing these services, with billings quarterly or annually. Bills will be based on actual cost or an appropriate allocation methodology. White Eagle incurred post-petition administrative service expenses of approximately $0 and $1.3 million during the three months ended May 31, 2020 and 2019, respectively, with $0 million and $2.8 million during the six months ended May 31, 2020 and 2019, respectively. Amounts due from White Eagle resulting from the administrative services during six months ended May 31, 2019 are included in investment in deconsolidated subsidiaries and amounts payable to IFT are included in other liabilities on the Lamington Road DAC consolidated balance sheet totaling $7.6 million, net of repayments.

Promissory Notes Receivables

Effective May 16, 2014, Lamington entered into a 10 year, $59.3 million unsecured Promissory Note ("the 8.5% Promissory Note") in favor of its parent company, Markley Asset Portfolio, LLC ("Markley"). The amount was used by Lamington as the partial purchase price of Markley’s interest in White Eagle. The annual interest rate on the Promissory Note is 8.5% and is due to be paid at the end of each calendar year; provided that any interest accrued at the end of a calendar year which is not paid within seven business days thereafter shall be capitalized and increased to the outstanding principal balance. As of May 31, 2019, the outstanding principal balance was $86.5 million, which includes $27.2 million in capitalized interest. The entire remaining principal balance of the 8.5% Promissory Note shall be due and payable, together with all accrued but unpaid interest, on May 16, 2024. No principal payments are due prior to the maturity date.

Effective July 28, 2017, Lamington issued an unsecured Promissory Note to Markley, in a principal amount of $57.0 million. The amount represents distributions of earnings from Lamington's share of profits of White Eagle, to satisfy Profit Participating Notes issued by Markley to Lamington (the "Special Dividend Note").The Special Dividend Note matures on July 28, 2027 and bears interest at an annual rate of 5.0% provided that any interest accrued at the end of a calendar year which is not paid within seven business days thereafter shall be capitalized and increased to the outstanding principal balance. As of May 31, 2019, the outstanding principal balance was $59.9 million, which includes $2.9 million in capitalized interest. The entire remaining principal balance of the Special Dividend Note shall be due and payable, together with all accrued but unpaid interest, on July 28, 2027. No principal payments are due prior to the maturity date.

The Company stopped accruing interest on both notes during the Chapter 11 cases, effective August 17, 2019 the notes are consolidated, and interest expense has been eliminated on consolidation.

At May 31, 2019, the notes were fair valued in accordance with ASC 820, with a fair value of approximately $70.1 million and was included in investment in deconsolidated subsidiaries and not separately presented on the face of the consolidated balance sheet. At May 31, 2019, the combined face value of the notes was $146.4 million.